Canada Again on US Watch List for IP Issues – US Continues Call for Canada to Wall Off “In Transit” Counterfeits

Published May 12th, 2017

Once again, Canada appears on the United States Trade Representative (USTR)’s Watch List in 2017.  The recently released 2017 Special 301 Report identifies several areas that the USTR views as deficiencies in Canada’s intellectual property protection and enforcement regimes that negatively affect US businesses.  As counterfeit and pirated products continue to be a growing problem for US businesses, one area of consistent concern is Canada’s enforcement regime against counterfeit and pirated goods entering the US through Canada.

Canada was previously on the USTR’s Priority Watch List before it amended its Trademarks Act to provide Canadian border officials ex officio authority to detain, seize and destroy pirated and counterfeit goods destined for Canada.  Despite these significant changes, the US remains critical of Canada’s decision not to extend the ex officio authority of border officials to goods that move “in transit” through Canada and into the US.

According to a recent OECD 2017 Trade in Counterfeit ICT Goods report, Canada was considered one of the top source economies for counterfeit information and communication technology (ICT) products.  Based on data gathered between 2011 and 2013, Canada was ranked third (after China and Hong Kong) in the top 15 economies that are most likely to be a provenance of ICT  goods – either as producers of counterfeit products or as strategic points of transit.  Top counterfeit ICT products include batteries, remote controls, cables and chargers, laptop and desktop computers, tablets and their parts and peripherals.

Canada is identified as both a potential producer of counterfeit ICT products and a potential transit point for counterfeit trade, but with a higher percentage towards being an important transit point. The OECD report notes that counterfeit trade routes are used by counterfeiters to falsify documents and hide the original point of production and/or departure, to establish distribution centres for counterfeit goods and transshipping them in smaller orders to their final destination, or to process products in free trade areas by adding counterfeit marks or repacking or re-labelling goods.  These counterfeit trade routes are deliberately complex and involve transit points in countries with less risk of IP-related enforcement actions, e.g. countries where goods in transit are not within the scope of local enforcement authorities and are less likely to be intercepted.

The Trump Administration signed an Executive Order on March 31, 2017 which directed the Department of Homeland Security to develop and implement a strategy for combating violations of US trade and custom laws for goods and a strategy for enhancing the seizure of counterfeit and pirated goods.  More recently, the Trump Administration signed an Executive Order on April 29, 2017 calling for a substantial review of all trade agreements, including NAFTA.

It is clear that the US has been unsatisfied for some time with Canada’s efforts in stopping the flow of counterfeit and pirated goods through the Canada-US supply chain.  In light of the recent OECD report and the positions taken by the Trump Administration, the changes called for in relation to Canada’s enforcement regime against counterfeit and pirated products could gain traction and could be expected to form part of the trade-related discussions between the US and Canadian governments in the upcoming years.

 

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